Chapter 78 — InvestmentSecurities

 

2009 EDITION

 

 

INVESTMENTSECURITIES

 

COMMERCIALTRANSACTIONS

 

GENERALPROVISIONS

 

78.1010 Shorttitle

 

78.1020 Definitionsand index of definitions

 

78.1030 Rulesfor determining whether certain obligations and interests are securities orfinancial assets

 

78.1040 Acquisitionof security or financial asset or interest therein

 

78.1050 Noticeof adverse claim

 

78.1060 Control

 

78.1070 Whetherindorsement, instruction or entitlement order is effective

 

78.1080 Warrantiesin direct holding

 

78.1090 Warrantiesin indirect holding

 

78.1100 Applicability;choice of law

 

78.1110 Clearingcorporation rules

 

78.1120 Creditor’slegal process

 

78.1130 Statuteof frauds inapplicable

 

78.1140 Evidentiaryrules concerning certificated securities

 

78.1150 Securitiesintermediary and others not liable to adverse claimant

 

78.1160 Securitiesintermediary as purchaser for value

 

ISSUE;ISSUER

 

78.2010 “Issuer”

 

78.2020 Termsof security; issuer’s responsibility and defenses; notice of defect or defense

 

78.2030 Stalenessas notice of defects or defenses

 

78.2040 Effectof issuer’s restriction on transfer

 

78.2050 Effectof unauthorized signature on security certificate

 

78.2060 Completionor alteration of security certificate

 

78.2070 Rightsof issuer with respect to registered owners

 

78.2080 Effectof signature of authenticating trustee, registrar or transfer agent

 

78.2090 Issuer’slien

 

78.2100 Overissue

 

TRANSFEROF CERTIFICATED AND UNCERTIFICATED SECURITIES

 

78.3010 Delivery

 

78.3020 Rightsof purchaser

 

78.3030 “Protectedpurchaser”

 

78.3040 Indorsement

 

78.3050 Instruction

 

78.3060 Effectof guaranteeing signature, indorsement or instruction

 

78.3070 Purchaser’srights to requisites for registration of transfer

 

REGISTRATION

 

78.4010 Dutyof issuer to register transfer

 

78.4020 Assurancethat indorsement or instruction is effective

 

78.4030 Demandthat issuer not register transfer

 

78.4040 Wrongfulregistration

 

78.4050 Replacementof lost, destroyed or wrongfully taken security certificate

 

78.4060 Obligationto notify issuer of lost, destroyed or wrongfully taken security certificate

 

78.4070 Authenticatingtrustee, transfer agent and registrar

 

SECURITYENTITLEMENTS

 

78.5010 Securitiesaccount; acquisition of security entitlement from securities intermediary

 

78.5020 Assertionof adverse claim against entitlement holder

 

78.5030 Propertyinterest of entitlement holder in financial asset held by securitiesintermediary

 

78.5040 Dutyof securities intermediary to maintain financial asset

 

78.5050 Dutyof securities intermediary with respect to payments and distributions

 

78.5060 Dutyof securities intermediary to exercise rights as directed by entitlement holder

 

78.5070 Dutyof securities intermediary to comply with entitlement order

 

78.5080 Dutyof securities intermediary to change entitlement holder’s position to otherform of security holding

 

78.5090 Specificationof duties of securities intermediary by other statute or regulation; manner ofperformance of duties of securities intermediary and exercise of rights ofentitlement holder

 

78.5100 Rightsof purchaser of security entitlement from entitlement holder

 

78.5110 Priorityamong security interests and entitlement holders

 

GENERALPROVISIONS

 

78.1010Short title.This chapter may be cited as Uniform Commercial Code–Investment Securities. [1961c.726 §78.1010; 1985 c.676 §78.1010; 1995 c.328 §1]

 

78.1020Definitions and index of definitions. (1) In this chapter:

(a)“Adverse claim” means a claim in which a claimant who has a property interestin a financial asset asserts that it is a violation of the rights of theclaimant for another person to hold, transfer or deal with the financial asset.

(b)“Bearer form,” as applied to a certificated security, means a form in which thesecurity is payable to the bearer of the security certificate according to itsterms but not by reason of an indorsement.

(c)“Broker” means a person defined as a broker or dealer under the federalsecurities laws, but does not exclude a bank acting in that capacity.

(d)“Certificated security” means a security that is represented by a certificate.

(e)“Clearing corporation” means:

(A)A person that is registered as a clearing agency under the federal securitieslaws;

(B)A federal reserve bank; or

(C)Any other person that provides clearance or settlement services with respect tofinancial assets that would require it to register as a clearing agency underthe federal securities laws but for an exclusion or exemption from theregistration requirement, if its activities as a clearing corporation,including promulgation of rules, are subject to regulation by a federal orstate governmental authority.

(f)“Communicate” means to:

(A)Send a signed writing; or

(B)Transmit information by any mechanism agreed upon by the persons transmittingand receiving the information.

(g)“Entitlement holder” means a person identified in the records of a securitiesintermediary as the person having a security entitlement against the securitiesintermediary. If a person acquires a security entitlement by virtue of ORS78.5010 (2)(b) or (c), that person is the entitlement holder.

(h)“Entitlement order” means a notification communicated to a securitiesintermediary directing transfer or redemption of a financial asset to which theentitlement holder has a security entitlement.

(i)(A)“Financial asset,” except as otherwise provided in ORS 78.1030, means:

(i)A security;

(ii)An obligation of a person or a share, participation, or other interest in aperson or in property or an enterprise of a person, that is, or is of a type,dealt in or traded on financial markets, or that is recognized in any area inwhich it is issued or dealt in as a medium for investment; or

(iii)Any property that is held by a securities intermediary for another person in asecurities account if the securities intermediary has expressly agreed with theother person that the property is to be treated as a financial asset under thischapter.

(B)As context requires, “financial asset” means either the interest itself or themeans by which a person’s claim to it is evidenced, including a certificated oruncertificated security, a security certificate or a security entitlement.

(j)“Indorsement” means a signature that alone or accompanied by other words ismade on a security certificate in registered form or on a separate document forthe purpose of assigning, transferring or redeeming the security or grantingthe power to assign, transfer or redeem it.

(k)“Instruction” means a notification communicated to the issuer of anuncertificated security that directs that the transfer of the security beregistered or that the security be redeemed.

(L)“Registered form,” as applied to a certificated security, means a form inwhich:

(A)The security certificate specifies a person entitled to the security; and

(B)A transfer of the security may be registered upon books maintained for thatpurpose by or on behalf of the issuer, or the security certificate so states.

(m)“Securities intermediary” means:

(A)A clearing corporation; or

(B)A person, including a bank or broker, that in the ordinary course of businessmaintains securities accounts for others and is acting in that capacity.

(n)“Security,” except as otherwise provided in ORS 78.1030, means an obligation ofan issuer or a share, participation or other interest in an issuer or inproperty or an enterprise of an issuer:

(A)That is represented by a security certificate in bearer or registered form, orthe transfer of which may be registered upon books maintained for that purposeby or on behalf of the issuer;

(B)That is one of a class or series or by its terms is divisible into a class orseries of shares, participations, interests or obligations; and

(C)(i)That is, or is of a type, dealt in or traded on securities exchanges orsecurities markets; or

(ii)That is a medium for investment and by its terms expressly provides that it isa security governed by this chapter.

(o)“Security certificate” means a certificate representing a security.

(p)“Security entitlement” means the rights and property interest of an entitlementholder with respect to a financial asset specified in ORS 78.5010 to 78.5110.

(q)“Uncertificated security” means a security that is not represented by acertificate.

(2)Other definitions applying to this chapter and the sections in which theyappear are:

(a)“Appropriate person” as defined in ORS 78.1070.

(b)“Control” as defined in ORS 78.1060.

(c)“Delivery” as defined in ORS 78.3010.

(d)“Investment company security” as defined in ORS 78.1030.

(e)“Issuer” as defined in ORS 78.2010.

(f)“Overissue” as defined in ORS 78.2100.

(g)“Protected purchaser” as defined in ORS 78.3030.

(h)“Securities account” as defined in ORS 78.5010.

(3)In addition, ORS chapter 71 contains general definitions and principles ofconstruction and interpretation applicable throughout this chapter.

(4)The characterization of a person, business or transaction for purposes of thischapter does not determine the characterization of the person, business ortransaction for purposes of any other law, regulation or rule. [1961 c.726 §78.1020;1965 c.271 §3; 1973 c.362 §1; 1985 c.676 §78.1020; 1995 c.328 §2; 2009 c.181 §89]

 

78.1030Rules for determining whether certain obligations and interests are securitiesor financial assets.(1) A share or similar equity interest issued by a corporation, business trust,joint stock company or similar entity is a security.

(2)An “investment company security” is a security. “Investment company security”means a share or similar equity interest issued by an entity that is registeredas an investment company under the federal investment company laws, an interestin a unit investment trust that is so registered or a face-amount certificateissued by a face-amount certificate company that is so registered. “Investmentcompany security” does not include an insurance policy, endowment policy orannuity contract issued by an insurance company.

(3)An interest in a partnership or limited liability company is not a security unlessit is dealt in or traded on securities exchanges or in securities markets, itsterms expressly provide that it is a security governed by this chapter or it isan investment company security. However, an interest in a partnership orlimited liability company is a financial asset if it is held in a securitiesaccount.

(4)A writing that is a security certificate is governed by this chapter and not byORS chapter 73, even though it also meets the requirements of that chapter.However, a negotiable instrument governed by ORS chapter 73 is a financialasset if it is held in a securities account.

(5)An option or similar obligation issued by a clearing corporation to itsparticipants is not a security, but is a financial asset.

(6)A commodity contract, as defined in ORS 79.0102, is not a security or afinancial asset.

(7)A document of title is not a financial asset unless ORS 78.1020 (1)(i)(A)(iii)applies. [1961 c.726 §78.1030; 1985 c.676 §78.1030; 1995 c.328 §3; 2001 c.445 §151;2009 c.181 §90]

 

78.1040Acquisition of security or financial asset or interest therein. (1) A personacquires a security or an interest therein under this chapter if:

(a)The person is a purchaser to whom a security is delivered pursuant to ORS78.3010; or

(b)The person acquires a security entitlement to the security pursuant to ORS78.5010.

(2)A person acquires a financial asset other than a security or an interesttherein under this chapter if the person acquires a security entitlement to thefinancial asset.

(3)A person who acquires a security entitlement to a security or other financialasset has the rights specified in ORS 78.5010 to 78.5110, but is a purchaser ofany security, security entitlement or other financial asset held by thesecurities intermediary only to the extent provided in ORS 78.5030.

(4)Unless the context shows that a different meaning is intended, a person who isrequired by other law, regulation, rule or agreement to transfer, deliver,present, surrender, exchange or otherwise put in the possession of anotherperson a security or financial asset satisfies that requirement by causing theother person to acquire an interest in the security or financial asset pursuantto subsection (1) or (2) of this section. [1961 c.726 §78.1040; 1985 c.676 §78.1040;1995 c.328 §4]

 

78.1050Notice of adverse claim. (1) A person has notice of an adverse claim if:

(a)The person knows of the adverse claim;

(b)The person is aware of facts sufficient to indicate that there is a significantprobability that the adverse claim exists and deliberately avoids informationthat would establish the existence of the adverse claim; or

(c)The person has a duty, imposed by statute or regulation, to investigate whetheran adverse claim exists, and the investigation so required would establish theexistence of the adverse claim.

(2)Having knowledge that a financial asset or interest therein is or has beentransferred by a representative imposes no duty of inquiry into therightfulness of a transaction and is not notice of an adverse claim. However, aperson who knows that a representative has transferred a financial asset orinterest therein in a transaction that is, or whose proceeds are being used,for the individual benefit of the representative or otherwise in breach of dutyhas notice of an adverse claim.

(3)An act or event that creates a right to immediate performance of the principalobligation represented by a security certificate or sets a date on or afterwhich the certificate is to be presented or